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Haikou Jiangdong New Area
Economy

Homecoming listings of Chinese mainland companies to reinforce Hong Kong's status as global financial hub

June 12, 2020


Abstract : With NetEase's secondary listing in Hong Kong, more U.S.-traded Chinese mainland companies will likely set out on their own homecoming journeys, casting a vote of confidence for the global financial hub despite threatened U.S. sanctions.

HONG KONG, June 11 (Xinhua) -- With NetEase's secondary listing in Hong Kong, more U.S.-traded Chinese mainland companies will likely set out on their own homecoming journeys, casting a vote of confidence for the global financial hub despite threatened U.S. sanctions.

NetEase Inc. made a strong Hong Kong market debut on Thursday with its shares ending at 130 Hong Kong dollars (16.77 U.S. dollars), 5.69 percent higher than its offering price of 123 Hong Kong dollars.

As the largest initial public offering (IPO) on Hong Kong Exchanges and Clearing Limited (HKEX) so far this year, NetEase's listing won enormous popularity among investors ahead of trading on Thursday, as its offering was oversubscribed about 360 times by retail investors and 14 times by institutional buyers.

NetEase issued about 171 million new ordinary shares to raise 21.09 billion Hong Kong dollars (2.72 billion U.S. dollars) to finance its global strategies, innovation and general corporate purposes, plus an over-allotment option to issue up to 25.72 million more shares.

A ceremony is held to celebrate the debut of NetEase Inc.'s shares on Hong Kong Exchanges and Clearing Limited (HKEX) in Hangzhou, capital of east China's Zhejiang Province, June 11, 2020. (Xinhua)

William Ding, founder and CEO of NetEase, said on Thursday that the Hong Kong listing marked the start of a brand-new journey for the company.

"By returning to a market in which we share a closer mutual understanding, we can further foster the collaboration of people and amass the power of passion and innovation to bring greater value to our users," Ding said.

Founded in 1997, NetEase, the world's second-largest mobile game company, went public on the Nasdaq in 2000 as the first batch of Chinese internet stocks to land in the U.S. stock market.

NetEase's Hong Kong listing, following Alibaba's mega fund-raising of more than 100 billion Hong Kong dollars (12.9 billion U.S. dollars) last November, came as the United States tightened its scrutiny of Chinese mainland companies trading on its markets.

The U.S. Senate passed in May the Holding Foreign Companies Accountable Act, a highly-politicized securities regulation directed against Chinese mainland companies with U.S. depositary receipts, stoking concerns about increasing delisting risk due to excessive supervisory rules.

Given the hostile regulatory environment, more Chinese mainland companies are expected to follow suit after Alibaba and NetEase, Hong Kong economist Liang Haiming said.

The stock code of NetEase 9999. is seen at the trading hall of Hong Kong Exchanges and Clearing Limited (HKEX) in Hong Kong, south China, June 11, 2020. (Xinhua/Wang Shen)

Morgan Stanley said in a research note that 28 U.S.-listed Chinese mainland companies, excluding Alibaba, are immediately eligible for listing in Hong Kong and another four may meet the requirements within the next 12 to 18 months, with fund-raising targets totaling 14.5 billion U.S. dollars if all of them opt for Hong Kong for secondary listings.

Nasdaq-listed JD.com will be the third to finish the secondary listing in Hong Kong. With its stocks to begin trading on June 18, the e-commerce giant will raise, at most, 35.65 billion Hong Kong dollars (4.6 billion U.S. dollars) as its offering was also oversold.

With more U.S.-traded Chinese mainland companies returning to the home market, Hong Kong is very likely to remain as the world's largest IPO destination this year, said Hong Hao, head of research and chief strategist at BOCOM International, a Hong Kong-based investment bank.

The Hong Kong stock exchange topped the world's IPO league table for a second straight year in 2019 and for the seventh time in the last 11 years, with 312.89 billion Hong Kong dollars (about 40 billion U.S. dollars) raised.

The new blood will enable the Hong Kong market to wean off its reliance on traditional industries, including finance and property, and make a shift to the new economy, which will offer investors diverse options and further cement Hong Kong's financial position, Liang said.

Analysts added that the return of companies listed overseas is also a boon to fortifying investor confidence after the United States threatened to impose sanctions on Hong Kong.

An advertisement board welcoming the listing of NetEase is seen outside the trading hall of Hong Kong Exchanges and Clearing Limited (HKEX) in Hong Kong, south China, June 11, 2020. (Xinhua/Wang Shen)

Charles Li, chief executive of HKEX, highlighted Hong Kong's unique advantages when congratulating NetEase's listing on Thursday, describing Hong Kong as the converter, the translator, and the connector between the East and the West.

In its role as a bridge between the Chinese mainland and the rest of the world, Hong Kong has developed into one of the most prosperous regions in Asia-Pacific and hosted global businesses and investors for decades. Since returning to the motherland in 1997, it has retained the advantages and continued to thrive under the "one country, two systems" principle.

Hong Kong's success is largely hinged upon "one country, two systems" and its status as a global financial center will remain unchanged thanks to the enduring development of the "one country, two systems" cause, Li said.

HKEX data showed that more than 1,260 mainland companies have been listed in Hong Kong, accounting for more than half of the total companies traded on HKEX and contributing more than 70 percent of market capitalization.

Thanks to closer mainland-Hong Kong financial ties, deals have accumulated to 36 trillion yuan (5.1 trillion U.S. dollars) under the Shanghai-Hong Kong Stock Connect by the end of May 2020, and trading via the Bond Connect, a program that allows overseas investors to buy the Chinese mainland's bonds, has risen to 5.7 trillion yuan (0.8 trillion U.S. dollars).

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Keyword: NetEase Hong Kong listing Shanghai-Hong Kong Stock Connect

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